Question

Suppose that Egypt decides to become self-sufficient in citrus fruits and even to export them. In order to accomplish this, large tax incentives are granted to companies that will invest in citrus fruits production. As a result, the Egyptian industry becomes competitive and able to sell fruits at the lowest price. Does Egypt have a comparative advantage? Why, or why not? What are the consequences for the overall economy? (hint: Answer this question theoretically. Do not use graphs or numbers in your answer. Your answer should not exceed 8 lines).

Answer 1